The human olfactomedin 4 gene (OLFM4) encodes an olfactomedin-related glycoprotein. OLFM4 is normally expressed in a limited number of tissues, including the prostate, but its biological functions in prostate are largely unknown. Loss of olfactomedin 4 (OLFM4) gene expression is associated with high grade of human prostate cancer. Genetics studies have found that deletions within the olfactomedin 4 (OLFM4) gene occur in approximately 25% of human prostate-cancer samples. To explore cellular and molecular mechanisms underlying OLFM4 functions, we investigated Olfm4-knockout mouse model and human prostate cancer cells that lack OLFM4 expression. Phenotypically studies of prostate from Olfm4-knockout mice found that sporadically developed prostatic intraepithelial neoplasia and prostatic adenocarcinoma in an age-dependent manner. The gene-expression signature of prostate tissues from Olfm4-knockout mice at 3 month-old and 15 month-old revealed significant changes for genes associated with prostate neoplastic progression. Sonic hedgehog-signaling pathway and target genes were significantly up-regulated in prostate from Olfm4-knockout mice. Importantly, we found Olfactomedin 4 inhibits prostate stem/progenitor cell growth and epithelial-to-mesenchymal transition (EMT) through down-regulated the hedgehog-signaling pathway genes and target genes activities. Moreover, we demonstrated that OLFM4 inhibited the hedgehog-signaling pathway via direct interaction with sonic hedgehog protein. These findings suggest that OLFM4 plays a critical role in prostate neoplastic progression and that OLFM4 protein has potential as a new marker for improving diagnostic/prognostic accuracy and likely targets for therapeutic approaches to prostate cancer.